Nokia 3Q Adjusted Profit Seen Rising, Potential for Upgrades — Earnings Preview – MarketWatch

Nokia 3Q Adjusted Profit Seen Rising, Potential for Upgrades — Earnings Preview – MarketWatch

By Dominic Chopping

Finland’s Nokia Corp. is scheduled to report results for the third quarter on Thursday. Here is what you need to know:

SALES FORECAST: Analysts polled by FactSet expect sales to rise 2.1% to 5.4 billion euros ($6.27 billion).

NET PROFIT FORECAST: Analysts expect Nokia’s reported net profit to rise to EUR218 million in the third quarter, from EUR194 million a year earlier. On an adjusted non-IFRS basis, analysts expect net profit to rise to EUR345 million from EUR305 million a year earlier.


–5G MOMENTUM: Eyes will be on updates on the company’s key performance indicators, such as the 5G conversion rate and the Reefshark share of 5G shipments. Analysts at UBS said that while some headwinds are expected in Nokia’s 3Q reported results such as component shortages or the loss of Verizon contracts, they believe organic growth could be solid in the quarter with positive revenue growth of 3% at constant currency.

–MARGINS: The net gross margin should increase by 150 basis points to 38.9% in 3Q, while the net operating margin should decrease by 100 basis points on an annual basis to 8.2%, due to a lower contribution from the highly profitable business with Verizon in the U.S. and 5G investments, Kepler Cheuvreux said.

–GUIDANCE: The company issued guidance late in July for full-year net sales of EUR21.7 billion to EUR22.7 billion and 10%-12% comparable operating margin versus 7%-10% previously. “Given the strong market dynamic especially in the U.S., we believe there is still some scope for Nokia to further upgrade its sales and margin guidance for 2021 and 2022, particularly,” UBS said.

–CASH: Beyond revenue growth and profitability, UBS believes a strong focus for investors will remain on cash flow generation. During 2Q21, Nokia’s free cash flow was EUR77 million, driven by strong adjusted profit, partially offset by cash outflows related to net working capital, capital expenditures, restructuring, income taxes and net interest. 2Q21 was the fifth quarter in a row of positive free cash flow.

Write to Dominic Chopping at [email protected]